BULLINK Portfolio: Analysis and Forecast of Kolmar Korea's Q1 2025 Performance
Quarterly Earnings Snapshot: Unearthing Hidden Surprises in a Booming Peak Season
1Q25 Review: Exceptional Performances Across Korea, China, and the US
In the first quarter of 2025, Kolmar Korea delivered an outstanding performance, surpassing market expectations. The company reported revenues of KRW 653.1 billion, marking a 14% year-over-year (YoY) increase. Operating profit soared by 85% YoY, reaching KRW 59.9 billion. The growth reflected substantial operating leverage and robust sales not just domestically, but also in key international markets, namely China and the United States.
Korean Market: Dominance in Sun Care
Domestically, Kolmar Korea's sales hit KRW 274.3 billion with an impressive 11% YoY growth. A significant driver of this growth was the rising demand for sun care products, particularly from indie brands. These brands are outperforming the market, capturing share as legacy brands decline. For Q2, which is historically the peak season for sun care, order books are robust, promising continued top-line growth. As legacy brands reduce their market footprint (estimated shrinkage to 10% from 40%), the improved product mix enhances operating margins to a record 12.4% in Q1.
Expansion in China: A Turnaround Story
Despite earlier underperformance, China operations recorded noteworthy success, with sales increasing by 20% YoY to KRW 41.6 billion. Operating profits surged by 72% YoY to KRW 3.1 billion, achieving an operating profit margin of 7.5%. The turnaround is attributed to resuming sun care orders as pricing negotiations stabilize. The positive trend is expected to continue.
US Market: Sustained Growth Momentum
The United States stood out with exceptional sales growth of 210% YoY, achieving sales of KRW 21.7 billion. Operating profits turned positive with an increase of KRW 300 million quarter-over-quarter, reaching a 6.9% operating profit margin. The success can be attributed to strong customer orders for new products and base makeup, as well as securing new clients. Profitability improvements have been consistent for two consecutive quarters, indicating robust underlying business strength.
Future Outlook: Strategic Opportunities and Investment Potential
The current market dynamics position Kolmar Korea's stock favorably, driven by a high momentum in sun care and attractive valuation prospects in the US. Anticipated strong order inflows during the sun care peak season are likely to enhance Q2 domestic margins to record levels. The completion of a second plant in the US by June promises further capacity growth. Active discussions with multiple brands regarding onshore production post-tariff modifications indicate strong future revenue potential. Consequently, the US revenue target for 2025 has been revised upward from KRW 80 billion to KRW 90 billion.
Reflecting enhanced estimates (with a 25F domestic operating margin of 12.5%) and favorable market multiples, the price target is elevated from KRW 92,000 to KRW 110,000. With the stock trading at an affordable 14x 12FM PER, the recommendation to buy remains firmly in place.
This analysis captures the strategic insights and growth trajectories of Kolmar Korea, showcasing its robust performance and promising outlook for investors in the fast-evolving cosmetic and sun care industries.
